Buy now, pay later, if you can afford it: Dewan passes microloan law

Summary

• Dewan Rakyat passes law requiring companies offering “buy now pay later” schemes to check customers’ debt capability before approving their credit.

• Deputy Finance Minister Lim Hui Ying says the government will keep a close eye on the industry to ensure that firms offering microloans act responsibly.

• MPs debating the bill caution that the lack of regulation could ensnare low-income users in debt traps.

PARLIAMENT | Companies that offer “buy now pay later” (BNPL) schemes in Malaysia will be required to check each customer’s debt capability before approving their credit facility, the Dewan Rakyat heard today.

Deputy Finance Minister Lim Hui Ying said the requirement would be imposed under the Consumer Credit Bill, which has been passed by the August House this evening.

“This is to ensure that credit consumers are capable of repaying the sum they borrow without facing serious financial pressure, which can lead them to fall into a debt trap.

“The Consumer Credit Commission will make sure the BNPL industry complies with the requirement,” she said during her winding-up speech.

Lim (Harapan- Tanjong) said the credit assessment is not to stop consumers from accessing credit facilities.

Instead, it is to ensure credit providers do not disburse loans arbitrarily and only allow credit at an amount that suits each consumer’s financial capability.

Interest rate ceiling

According to the deputy minister, the current situation shows that most BNPL consumers only take out credits in small amounts that do not cross the threshold of bankruptcy risk.

“However, this (industry) will still be monitored closely and the appropriate actions will be taken to ensure the BNPL industry acts responsibly,” Lim stressed.

In response to concerns raised about interest rates, Lim said the government plans to impose a ceiling for the BNPL scheme.

However, the move would only be introduced at the next phase after enough data is collected.

Earlier in the day, the deputy minister had tabled the bill for its second reading before it was debated by 24 MPs.

It was passed by the Dewan Rakyat after receiving a resounding voice vote at about 5pm.

‘Rakyat must be protected’

During the debate session, many elected representatives raised concerns over BNPL facilities being offered without proper control and their adverse impacts on consumers, especially those from low-income backgrounds.

Former education minister Radzi Jidin (PN-Putrajaya) had earlier questioned whether the commission would have the powers to set a credit limit for users to avoid them falling into endless cycles of debt.

He noted that the commission should be empowered with the authority to control or limit certain charges linked to a company, such as hidden fees and late payment penalties.

Highlighting that the BNPL industry has remained unregulated thus far, the Bersatu MP queried whether a credit provider would have to apply for a licence from the commission once the bill comes into force, and if there would be any implications if a company is unable to secure said licensing.

Mas Ermieyati Samsudin (PN-Masjid Tanah) said the new law “must be strict and protective of the rakyat. If not, it would be abused as an instrument by the capitalists hiding behind the name of the credit facility”.

Zulkafperi Hanapi (Independent-Tanjong Karang) also urged authorities to ensure that the commission is not turned into a “corporate tool” that is controlled by lobbyists instead of ensuring the people’s welfare.

He asserted that there are currently too many institutions which look formidable from the outside, but are actually “loose” in terms of integrity and bravery in defending the rakyat’s rights.

On the other hand, Young Syefura Othman (Harapan-Bentong) cautioned against “too strict” enforcement measures against the BNPL industry, expressing concern that hard-pressed individuals might resort to more dangerous and high-risk alternatives to alleviate their money woes.

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